Having a cyber security breach can be nothing short of horrific for any business. The bad publicity alone costs banks $200 million per year in customer acquisition and retention, according to CNN Money . They go on to state that after an attack, 52% of customers stop doing business with the victim company. Even scarier? 75% of companies do not recover after six months.
In many cases, businesses lack the resources to recover from a cyberattack without going out of business. Many companies have to let good employees go as a result.
One of the biggest effects on businesses due to cyber security breaches is monetary loss. It’s difficult to quantify because it depends on a number of factors: how much information was taken, whether or not this information was encrypted (and if it wasn’t, what type of data that was), and what industry the business is in. This can lead to a number of other negative effects, such as loss of customer trust, data manipulation, and damage to the business’s reputation.
Some businesses are forced to shut down their operation when they are targeted by hackers because the hacks cause major damage that requires expensive repairs and complete system replacements. Some large companies have spent millions of dollars on recovering from a cyber security breach.
In one example, Target Corporation was forced to shut down their entire operation for several days in order to fix healthcare information that had been breached by hackers. Target had to spend over $200 million dollars on repairing the damage caused by the hackers and affected customer credit card accounts were replaced by a company at no cost. Target was also hit with a $39 million dollar class action lawsuit and announced that they were beginning to use more secure chip-and-PIN credit card technology instead of the traditional magnetic strip.
Data has become an essential part of not only business operations but also the daily lives of people. When this data is taken, it puts organizations at risk because they can’t protect themselves from competitors or other malicious groups who want access to that information for many reasons.
Over the past several years, there has been a noted increase in cyber security breaches. With every new breach comes a myriad of lasting impacts on both individual businesses and society as a whole. In an effort to maintain consumer trust, businesses must pay very close attention to their data protection policies and procedures. Data theft is estimated to cost the United States economy as much as $100 billion a year, and those costs are only continuing to rise.
Detrimental side effects of cyber security breaches are the ability for attackers to make very specific negative findings from within stolen information. These could be anything from finding out the types of technologies that a company uses to what their strategies and goals are . This is because data breaches oftentimes aren’t life-threatening, like a physical attack, but rather one that compromises information.
One of the primary challenges that businesses face today is cyber security. The nature of business puts organizations in constant contact with customer data and other sensitive information–which makes them an ideal target for hackers and cybercriminals. As criminals become more sophisticated, the average time it takes for companies to detect a cyber security breach is continuing to rise. Recent data suggests that it can take many organizations over 200 days to discover a breach—which leaves them exposed during all of those intervening days.
The business impacts of cyber security breaches also include potential increase in insurance premiums for businesses. If a data breach, or similar type of incident occurs that results in loss to the organization, insurers might respond by increasing premiums due to higher risk. It is possible that an insurer may deny coverage if the company has suffered repeated incidents leading to multiple claims.
Business owners face both the financial and reputational damage of a cyber security breach. If governmental agencies can prove that you ignored previous warnings to improve your security practices, they may fine your company or even shut it down until you meet specific requirements.
If data is compromised, the customers who have been affected by the identity theft may file a class action suit. Even a small company can face a lawsuit of this nature that they cannot win, resulting in costly legal fees and the loss of business. When your customer base is severely reduced, it affects sales revenue as well as payroll for your employees. In many cases, smaller companies are forced into bankruptcy following a cyber security breach.
On the other side of the fine coin, governmental agencies take cyber security breaches very seriously and your business can suffer these negative impacts without any kind of warning. For example, if the FBI finds that your company has not done enough to protect consumer information, you can be fined $250000 every time a user’s information is compromised. It is also possible that the FBI orders you to remediate critical vulnerabilities in your system, which can not only be costly but time consuming as well.
While $250000 may not seem like much for a large company with billions of dollars in revenue, smaller companies can be forced out of business by such fines if they are unable to come up with the necessary corrective action plan.
Loss Of Trust
Negative business impacts of cyber security breaches also include loss of customers. Security breaches resulting in the exposure of customer data can lead to significant losses if customers lose trust and stop buying products or services from the company that was breached. Additionally, businesses may need to pay higher prices to attract new customers.
Another business impact of a cyber security breach is damage to the company’s brand image. Negative publicity due to a data loss or exposure can result in a significant loss of revenue as clients and partners begin pulling out of relationships with the organization. Customers, moreover, might lose trust and stop buying products or services from the company that was breached.
Loss of customer trust after a cyber security breach is a critical impact on businesses. After an attack, customers are less likely to want to engage with the compromised business. This means that people will be less likely to use their products and services in the future, reduce customer engagement with marketing campaigns or even go elsewhere for service. This can have a devastating impact on business revenue.
Another detrimental business impact of cyber security breaches is the bad public relations that will result. A company needs to be trusted by its consumers in order to maintain healthy financials, and when they are breached it can erode trust quickly. Customers are likely to pay attention to the news stories about the cyber attack, and when they do companies are no longer trusted.
Rise In Insurance Premiums
In the past, cyber security breaches were treated as a cost of doing business because there was no real way to calculate how much they would affect a company. In those cases, one might have been able to say that the company lost a certain number of customers, or had a lower stock price for a few months after the event. But now it is possible to put a number on the costs of cyber security breaches, and it is becoming more and more dangerous for companies that have been breached.
Many people are talking about how they will start charging companies more money when they buy insurance, because cyber security breaches cost them far too much. In fact, some people estimate that premiums could go up by as much as 500% after a cyber security breach. This would be especially bad for the small to medium sized companies that are at the heart of today’s economy. If insurance premiums go up, it could make starting a business very hard because all businesses are vulnerable to cyber security breaches at some point in their life.
The other reason why this rise in insurance premiums is concerning is because these costs are often passed on to the consumer. If your car is totaled in an accident, you can pay more for car insurance even if it’s not your fault. When cyber security breaches happen, the same thing happens to the company that was breached – they have to pay more for cyber security which can be passed on to the customers.
The worst part about this is how it can affect a company’s reputation. If they pay more for cyber security, it becomes clear that they do not have good cyber security. In some cases, people will start avoiding doing business with companies that have been breached because of their lack of commitment to cyber security. It’s important to take cyber security seriously and understand that there may be a price to pay if you don’t.
The detrimental business impacts of cyber security breaches are often overlooked as companies prioritize protecting their technology and information systems. This is not the right approach to take, as a cyber attack can cause severe damage that goes far beyond losing money and time.
One of the most significant effects that a breach may have on a company is loss of customer data. In today’s world, where cybersecurity is at the forefront of customers’ minds, their trust isn’t easily won back after a breach. Customers that have been affected by a data breach can suffer from both financial and non-financial losses. Contact Bayshore Interactive today to find out how your business can stay safe from hackers.